US LL Outlook: Once again, loan market awaits M&A revival as 2026 begins

US LL Outlook: Once again, loan market awaits M&A revival as 2026 begins

Kerry Kantin - US Bureau Chief, LevFin Insights

5 January 2026

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  • How anticipated deal activity revival could reshape supply dynamics and market balance.
  • Why competition between traditional and alternative lenders intensifies for both new business and refinancings.
  • Which structural and regulatory factors are driving the approaching refinancing wave and execution challenges.
  • What artificial intelligence disruption fears mean for borrower valuations across vulnerable sectors and portfolios.
  • Where return opportunities and risk concentrations emerge as rate environment and credit cycles evolve.

Executive Summary

Market participants anticipate that deal activity will finally accelerate after previous false starts. Elevated forward calendars suggest renewed momentum as recent volatility fades from memory.

Sponsors and strategic buyers face pressure to deploy capital amid favorable regulatory conditions. However, valuation gaps between buyers and sellers continue creating challenges for completing transactions.

Direct lenders increasingly compete with traditional banks across both new deals and refinancing opportunities. Flexible structures and delayed-draw facilities remain attractive despite higher spreads in alternative channels.

Strong demand fundamentals are expected to persist even as base rates decline gradually. Secondary markets offer limited upside potential with most credits trading near historical tights.

Artificial intelligence disruption concerns loom over multiple sectors with vulnerable business models exposed. Maturity wall refinancing activity will intensify as borrowers address upcoming obligations strategically.

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